Excerpt:.....2 (17) - manufacture activity should result in transforming a thing into different commercial commodity - process of repairing drums does not amount to manufacture within purview of section 2 (17) - held, order of tribunal upheld. - - in this regard, it must be clarified that although the word 'reconditioning' has been used in the question referred to us, a plain reading of the whole question as well as the facts set out in the judgment of the tribunal make it clear that all that the respondents were doing was that they purchased old drums and after repairing the leakages, dents, etc. naik placed strong reliance on the decision of the supreme court in nagpur electric light and power co. apart from this, we may point out that the definition of the expression 'manufacturing..........and context of a sales tax legislation of which the pith and substance is a tax primarily on the sales of goods and subsidiary on the purchases of goods. following this decision, we are of the view that the repairing of the old drums by the respondents cannot be said to amount to manufacture within the meaning of the said expression in section 2(17) of the said act and the respondents cannot be held to be manufacturers of goods in regard to these drums. 6. mr. naik placed strong reliance on the decision of the supreme court in nagpur electric light and power co. v. employees' state insurance corporation : (1967)iillj40sc , where it has been held that in view of section 2(k)(iii) of the factories act, 1948, the process of transforming electrical energy from a high to a low potential and.....

Judgment:

Kania, J.

1. This is a reference under section 61(1) of the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the said Act').

2. As only a narrow question has been referred to us for our consideration in this reference, we propose to set out only the facts necessary for the consideration of that question. These facts are as follows : The respondents carried on the business of purchasing old and empty drums and, after repairing the leakages, dents, etc., in the old drums, reselling the same. During the assessment periods from 1st January, 1960, to 31st March, 1960, 1st April, 1960, to 20th October, 1960, and 21st October, 1960, to 8th November, 1961, respectively, the respondents were assessed by the Sales Tax Officer concerned on the basis that they were manufacturers in respect of the aforesaid drums repaired and sold by them. The respondents appealed against these decisions to the Assistant Commissioner of Sales Tax. In regard to this question the appeals were dismissed, although on certain other matters, with which we are not concerned, the appeals were partly allowed. The respondents then filed second appeals before the Sales Tax Tribunal. The Tribunal held that the respondents were not manufacturers in respect of the aforesaid drums and allowed the appeals in this regard. We may make it clear that it was contended by the department before the Sales Tax Tribunal that the respondents were estopped from taking up the contention that they were not manufacturers. But that contention of the department has been negatived by the Tribunal on the basis of the facts found by it. No question has been referred to us in connection with this contention and, hence, we are not concerned with the same in this reference.

3. The question which has been referred to us in this consolidated reference, at the instance of the Commissioner of Sales Tax, for our consideration is as follows :

'Whether, having regard to the facts and circumstances of the present case, the Tribunal was justified in law in coming to the conclusion that the reconditioning of old drums purchased from unregistered dealers by removing dents and leakages therein did not amount to manufacture as defined by section 2(17) of the Bombay Sales Tax Act, 1959 ?'

4. Section 2(17) of the said Act runs as follows :

' 'Manufacture', with all its grammatical variations and cognate expressions, means producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating, or adapting any goods; but does not include such manufactures or manufacturing processes as may be prescribed.'

5. The contention of Mr. Naik, the learned counsel for the applicant, is that as the respondents reconditioned the old drums purchased by them, they must be held to be manufacturers. It was submitted by him that the activity of reconditioning would amount to 'altering' the said drums. In this regard, it must be clarified that although the word 'reconditioning' has been used in the question referred to us, a plain reading of the whole question as well as the facts set out in the judgment of the Tribunal make it clear that all that the respondents were doing was that they purchased old drums and after repairing the leakages, dents, etc., resold the same. It was submitted by Mr. Naik that the said repaired drums were really a different commodity from the old drums purchased by the respondents. It was submitted by him, in the alternative, that for the activity to amount to 'manufacture' within the meaning of that term in section 2(17) of the said Act, it was not necessary that as a result of the activity a new commodity must come into existence. It is quite clear that merely repairing an old drum cannot be said to bring into existence a different commercial commodity. It is significant that in the judgment of the Tribunal it nowhere appears that it was even the contention of the department before the Tribunal that as a result of the repairs carried out on the old drums by the respondents a different commercial commodity came into existence or that the repaired drums constituted a different commercial commodity from the old drums purchased by the respondents. If such was the case of the department there would undoubtedly have been a finding by the Tribunal as to whether the repaired drums constituted a different commercial commodity from the old drums purchased by the respondents. The only contention advanced by the department was that the process of repairing the drums itself amounted to 'manufacture' within the definition of the said expression in section 2(17) of the said Act. In this regard, we may refer to our decision in Commissioner of Sales Tax v. Dunken Coffee Manufacturing Co. [1972] 30 S.T.C. 337 (S.T.R. No. 9 of 1973) dated 28th January, 1975 (delivered by Madon, J.), where, after considering several decisions including the decisions of the Supreme Court, we have taken the view that the ratio of the decided cases shows that for an activity to amount to manufacture it must result in a different commercial article or commodity. It must not be a commodity which is commercially the same as it was before the activity was applied to it. In that case, we have pointed out that the test in all cases is to ascertain whether the result is commercially a different commodity and it is irrelevant whether this result is produced by a mechanical or chemical process or otherwise. Even under the very wide definition of 'manufacture' to be found in clause (17) of section 2 of the said Act the various activities set out therein must result in a different commercial commodity in order that such activities may amount to manufacture of goods. This definition must be interpreted bearing in mind the fact that it has been inserted in the setting and context of a sales tax legislation of which the pith and substance is a tax primarily on the sales of goods and subsidiary on the purchases of goods. Following this decision, we are of the view that the repairing of the old drums by the respondents cannot be said to amount to manufacture within the meaning of the said expression in section 2(17) of the said Act and the respondents cannot be held to be manufacturers of goods in regard to these drums.

6. Mr. Naik placed strong reliance on the decision of the Supreme Court in Nagpur Electric Light and Power Co. v. Employees' State Insurance Corporation : (1967)IILLJ40SC , where it has been held that in view of section 2(k)(iii) of the Factories Act, 1948, the process of transforming electrical energy from a high to a low potential and the process of transmitting the energy through supply lines are both manufacturing processes. In our opinion, reliance on this decision is entirely misplaced. In the first place, as we have already pointed out in our decision in Commissioner of Sales Tax v. Dunken Coffee Manufacturing Co. [1975] 35 S.T.C. 493 (S.T.R. No. 9 of 1973), the definition of the expression 'manufacture' in clause (17) of section 2 of the said Act has to be interpreted bearing in mind the fact that it has been inserted in the setting and context of a sales tax legislation of which the pith and substance is a tax primarily on the sales of goods and subsidiary on the purchases of goods. The said Act is a piece of fiscal legislation, whereas the Factories Act is a piece of social welfare legislation, and it would be highly dangerous to interpret the definitions of terms in a fiscal statute in the light of the definitions or interpretations given to similar terms in a social welfare legislation. Apart from this, we may point out that the definition of the expression 'manufacturing process' in section 2(k) of the Factories Act clearly specifies that the process of generating, transforming or transmitting power would amount to a manufacturing process, and hence on the very terms of that definition, transforming electrical energy from a high to a low potential and the process of transmitting such energy through supply lines were both manufacturing processes. It is very significant that in the definition of the expression 'manufacturing process' under the Factories Act, it has been provided, inter alia, that repairing, oiling, washing and cleaning would be processes amounting to 'manufacturing process' for the purposes of that Act, whereas under the said Act none of these activities are included even in the comprehensive definition given to the term 'manufacture' in section 2(17) of the said Act.

7. Mr. Naik next placed reliance on the decision in State v. Madhogaria : (1959)IILLJ50Ker , where it was held that the process of cutting and drying are cantus and garbling of pepper is a manufacturing process under section 2(k) of the Factories Act, 1948. For the reasons, which we have already pointed out, this decision cannot be of any assistance to Mr. Naik. Apart from this, the process involved in that case was altogether a different process from the simple activity of repairs carried on by the respondents on the goods in question in the case before us.

8. We may make it clear that although the question referred to us is whether the activity of repairs carried out by the respondents on the old drums could be said to amount to 'manufacture' as defined in section 2(17) of the said Act, the question which really arises is, in a sense, under the provisions of section 10(1) of the said Act, which, at the relevant time, ran as follows :

'(1) There shall be levied a sales tax on the turnover of sales of goods specified in Schedule E at the rate set out against each of such goods in column 3 thereof, but after deducting from such turnover, -

(i) sales of goods on the purchase of which the dealer is liable to pay purchase tax under section 13 or 14.'

9. The contention of the respondents was that the drums purchased by them were the same goods as the drums sold by them after repairs and hence, they were entitled to deduct from their turnover of sales the amounts realised by the sale of the said drums, as they were liable to pay purchase tax in respect of their purchases of the said drums. We repeatedly asked Mr. Naik as to how from the point of view of section 10(1) of the said Act it was at all material as to whether the respondents were manufacturers in respect of the said old drums or not once a conclusion has been arrived at that even after the repairs were carried out by the respondents on the said old drums, the said drums could not be said to constitute a different commercial commodity from the old drums purchase by the respondents. Mr. Naik was, however, unable to give us any enlightenment in this regard. The only submission he made in this connection was that once the aforesaid repairs were carried out on the aforesaid drums, they could not be said to be the same goods. This contention, in our opinion, is clearly erroneous for the reasons which we have already indicated earlier and must be rejected. It was next urged by Mr. Naik that once the activity of manufacture had been carried out on the said old drums, they must, in any event, be deemed to have become different goods. This contention also must be rejected, as we have already taken the view that the activity carried out by the respondents on the said old drums does not amount to 'manufacture' within the purview of section 2(17) of the said Act.

10. In the result, the question referred to us must be answered in the affirmative. The applicant to pay to the respondents the costs of this reference.